Issues for Landlords of Room Shares

There have been numerous news articles this week about the increase in the number of people sharing rooms in London. SpareRoom.co.uk has reported a 71% increase in searches for shared rooms in the last 2 years with another site, Kangaroom.net reporting increase of 48%.

As the term suggests, a room share is when two people (not a couple) or more share a room, with each person paying to occupy it. This is different from a house or flat share where each person/couple has their own room and they all jointly rent the property from a Landlord. Room sharing can lead to a number of issues arising which Landlords need to be aware of.

It is a common misconception that having a document referred to as a “tenancy agreement” means that a Tenancy has been created. In fact there are requirements necessary for a tenancy to exist, one of these is that the tenant must have exclusive possession. The fact that the room is shared by other people and that one occupier cannot exclude the others means that an occupier does not have exclusive possession. As such the occupation of the room is just a permission to be there, which is legally referred to as a licence. This is evidenced further by taking into account that other facilities in the premises (i.e. bathroom, kitchen, etc) are also likely to be shared, possibly with other people if more than one room in the premises is occupied by multiple people.

It is still advisable to record the terms of the agreement in a document, such as a Licence Agreement. The agreement will set out the terms of the person’s occupation including the amount they have to pay, the term of their occupation, and clauses relating to ending the agreement, as you would when granting a tenancy. In particular, it is likely to be worth including some specific provisions regarding the other occupiers who will also be sharing the rooms.

Many Landlords may feel that the difference between a tenant or licensee is unimportant, as long as whoever is staying there is paying what they should. However, there are some important practical distinctions between a tenancy and a licence.

For example, the requirement for Landlords to protect a deposit only applies to deposits taken in relation to Assured Shorthold Tenancies (‘AST’). Since no tenancy exists the requirement for the Landlord to register a deposit with a deposit protection scheme does not apply. If a landlord takes a deposit in respect of a licence there is no need to register it.

Equally, the procedure for evicting a tenant is different to the procedure for evicting a licensee. Although both procedures involve serving a notice requiring the person to leave the property, the form of the notice and the period of notice that needs to be given differs between them.

A Landlord seeking possession from a licensee must serve a Notice to Quit giving the licensee “reasonable” notice to vacate the premises. What constitutes reasonable notice will depend on the facts of an individual case but generally a month would considered to be reasonable. If the licensee does not comply with the notice the Landlord will have to pursue a claim for possession in the County Court. If the licensee does not comply with the possession order then a Landlord may be forced to instruct bailiffs to enforce the court order and physically evict the licensee. In any case a Landlord cannot physically evict someone themselves and must have a court order and must use a Bailiff.

Consideration should also be given to whether the premises is a House of Multiple Occupation (‘HMO’) and if so whether they require a licence from the local authority in order to comply with the requirements of Housing Act 2004. A HMO is where a premises is let to a number of people who form two or more households (A household is defined as members of the same family living together, i.e. three friends sharing will be classed a three households, but a couple sharing with third person would be classed as two households).

According to the Chartered Institute of Environmental Health, since the Housing Act 2004 came into force the number of number of HMOs has increased steadily, with numbers accelerating following the financial crisis in 2008. It was estimated in March 2014 that the number of HMOs in the UK had increased from 381,361 in 2003-2004 to 462,693 in 2012-2013 . Further a report produced by the Eaga Charitable Trust in 2011 reported that the majority of the HMOs are in the south of the country and that the London Borough of Hackney had the highest number of HMOs accounting for 14.7% of dwellings in the borough. This was based on figures from the 2011 census, but includes a warning that the actual number of HMOs is likely to be higher than recorded as not all HMOs have to be licensed and so may not have come to the attention of local authorties.

A HMO requires a licence from the local authority if it meets specific requirements, namely if the property has three or more floors, that five or more people live at the property, and those people are from at least two households, and there is some sharing of amenities (i.e. kitchen, bathroom, etc). Landlords should also be aware that local authorities have a discretion which allows them to extend licensing to include wider definitions. Landlords should check the criteria of the local authority that the property is in. If you should have a HMO licence but fail to obtain one, or do not comply with any conditions imposed on the licence, you could be found to be committing an offence and could be fined up to £20,000.

Landlords should make sure they understand what position they, and the occupiers of their property are in in order to properly manage the tenancies or licences. If you are unsure of the position, or the best way in which to proceed with something are you should seek legal advice at an early stage in order to avoid issues arising and keeping the costs of managing any issues which do arise to a minimum.